The NYT reports that China has been buying up fewer dollars in recent months to hold as reserves. It suggests that this may be due to growing concern about the potential loss in value on its dollar holdings.
It is worth noting that China must buy up dollars in order to keep down the value of its currency against the dollar. China has maintained a managed exchange rate where the value of the yuan is below the market rate. This reduces the cost of China's imports to people in the United States. This managed exchange rate is exactly what the U.S. government has complained about for years as currency "manipulation."
If China decided to stop buying up dollars for whatever reason, then it would mean that China's currency would rise against the dollar. Ostensibly, this is what U.S. government wants to see happen. It is not something that should provoke fear.
Unlike many news organizations, the Prospect has remained staunchly committed to keeping our journalism free and accessible to all. We believe that independent journalism is crucial for a functioning democracy—but quality reporting comes at a cost. From Trump’s threat to the free press to Musk’s influence on our democracy, there is too much at stake in 2025 to stop now.
We’re behind on our goal to raise $75,000 to continue delivering the hard-hitting investigative journalism you’ve come to expect from us. Your support helps us maintain our independence and dig deeper into the stories that matter most.
We need you to make a year-end contribution today. Any amount helps secure our future and ensure we can continue holding power to account.
